Brussels, 19/09/2014 (Agence Europe) - Benoît Coeuré, member of the European Central Bank (ECB)'s Executive Board, and Jörg Asmussen, secretary of state at the German Employment and Social Affairs Ministry (writing in a personal capacity), called on member state and European politicians on Friday 19 September to take “concerted action using all available levers” to deal with the “unprecedented” economic challenges facing Europe.
The picture isn't rosy when it comes to growth, inflation or jobs, but in an opinion piece published in French newspaper Les Echos and German newspaper Berliner Zeitung, Coeuré, and Asmussen explain that “people are inclined to look for simple answers to what is a complex problem. Some argue that printing more money and increasing public spending is the only way out of this economic malaise. Others cling to the hope that a strict path of austerity will prove a panacea. And there are also those who believe that a return to the national solutions of the past would solve all our difficulties.” Coeuré and Asmussen argue that there should be a three-pillar strategy based on monetary, budget and structural policies. “Germany and France have a decisive role to play in the context of this three-pillar strategy,” they write.
When it comes to monetary policy, “the recent decisions by the ECB have shown that it is meeting its responsibilities in accordance with its mandate to maintain price stability. And it is ready to take further measures, if necessary. As for fiscal policy, the flexibility embedded within the Stability and Growth Pact needs to be used without jeopardising its credibility. This is also an issue of fairness vis-à-vis those countries which have made significant efforts to repair their budgets. Meanwhile, Germany can use some of its budgetary room of manoeuvre to support investment and reduce tax wedges, while preserving its sound fiscal position.”
“Countries without margins of manoeuvre should not undo the progress made on fiscal consolidation. How can we rebuild mutual trust if we renege on our commitments? Thus, countries lacking fiscal space should instead aim to achieve a more growth-friendly mix of fiscal policies by simultaneously cutting unproductive spending and distortionary taxes as for instance the French 'Pacte de Responsabilité et de Solidarité'. Asmussen and Coeuré say: “The sooner structural reforms are undertaken, the sooner they will create the fiscal space and strengthen our ability to preserve the European social model. (…) France needs reforms to support employment and revive business investment, notably by reducing barriers to entry in protected sectors and by eliminating the obstacles to the development of small and medium-sized enterprises. Germany needs to boost competition and productivity in the domestic non-tradable sector, which would also have a positive impact on the country's growth prospects and make it less vulnerable to shocks affecting trade with non-euro area countries.” (EL)